Free trade, free capital flow must be the way forward: ADB president

  • The multilateral agency has cautioned about the potential worsening of regional prospects due to escalating geopolitical tensions.

Gireesh Chandra Prasad
First Published4 May 2024
Asia Development Bank president Masatsugu Asakawa. (File Photo: AFP)
Asia Development Bank president Masatsugu Asakawa. (File Photo: AFP)

Tbilisi, Georgia: Asian Development Bank (ADB) president Masatsugu Asakawa has underscored the imperative of nurturing a greener and more interconnected global economy. 

Speaking at the opening session of the 57th annual meeting of the multilateral bank here on Saturday, Asakawa cautioned countries against resorting to protectionism and segmentation in response to trade and supply chain disruptions, saying that such measures are not sustainable solutions. 

“It might be easy to look back at the pandemic, or at current geopolitical tensions and conflicts, and conclude that globalization is dead. I do not believe it," Asakawa said in his address to leaders of the Asia Pacific region, as shared by ADB.

“It is true that global trade and supply chains are vulnerable to shocks. But the answer cannot be protectionism and segmentation. Free trade and free movement of capital have benefited our region for decades, and this must be the way forward.”

Highlighting the need for enhanced regional cooperation, Asakawa urged leaders to prioritize resilience-building in supply chains, facilitate cross-border trade, encourage private sector investments, and improve financial and tax cooperation.

His call for openness coincides with a period of geopolitical tensions affecting global trade. Last month, the International Monetary Fund (IMF) in its World Economic Outlook highlighted a trend of increasing trade fractures along geopolitical lines since the onset of the conflict in Ukraine in February 2022, accompanied by a rise in cross-border trade restrictions.

The IMF report indicated a significant decline in the growth of trade flows between geopolitical blocs compared to intra-bloc trade growth. This shift in trade patterns is happening alongside a rise in cross-border trade restrictions, with approximately 3,200 new restrictions implemented in 2022 and about 3,000 in 2023, up from around 1,100 in 2019.

Additionally, Asakawa urged leaders to address the decarbonization of global supply chains. 

“Trade-related activities account for up to 30% of the world’s carbon emissions. The uncomfortable truth is that with Asia’s strong growth, our contribution to greenhouse gas emissions is rising. Now is the time to act to reduce global value chain-related emissions for a more sustainable future,” he said. 

In its April release of the Asian Development Outlook, the multilateral agency had cautioned about the potential worsening of regional prospects due to escalating geopolitical tensions. Since October, ongoing conflicts in West Asia have disrupted trade and shipping routes, leading to supply chain disturbances and rerouting of cargo ships to avoid areas like the Red Sea—a critical trading route linking Europe and Asia.

These disruptions have led to supply chain disturbances and increased shipping costs, and could potentially add half a percentage point to inflation in developing Asia this year. 

The reporter is in Tbilisi at the invitation of ADB.

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